Court Grants Preliminary Injunction to Northern Rockies Regional Center in Dispute Over EB-5 Integrity Fund Fee

On June 27, 2024, Northern Rockies Regional Center, LLC received a “Notice of Intent to Terminate” from the United States Citizen and Immigration Services (USCIS) due to the non-payment of its 2024 EB-5 Integrity Fund fee by December 30, 2023. On July 15, Northern Rockies sued, claiming the notice violated the 2022 Reform and Integrity Act, the Administrative Procedure Act (APA), and the Due Process Clause. A court hearing on July 29 granted Northern Rockies preliminary injunctive relief. Such relief was granted by the Missoula Division of the  United States District Court, D. Montana. Northern Rockies Reg’l Ctr., LLC v. Ur M. Jaddou, Dir., U.S. Citizenship and Immigration Serv., No. CV 34-99-M-DWM, 2024 WL 3594297 (D. Mont. Jul. 31, 2024).

Background.

The EB-5 Program, established in 1990, offers visas to immigrants investing substantial capital in U.S. commercial enterprises creating at least ten full-time jobs. See 8 U.S.C. § 1153(b)(5)(A). The Regional Center Program, created in 1992, allows for job creation indirectly through investments in designated “regional centers.”

The 2022 EB-5 Reform and Integrity Act introduced the EB-5 Integrity Fund, requiring annual fees from regional centers to support enforcement measures. See Pub. L. 117-103, § 103, 136 Stat. 1070, 1075 (2022) (codified at 8 U.S.C. § 1153(b)(5)(J)). Fees are due between October 1 and October 31 each year, with penalties for late payments and termination of designation if fees remain unpaid after 90 days. See 88 Fed. Reg. 13141, 13141 (Mar. 2, 2023). For fiscal year 2024, fees were due by October 30, 2023. The Agency warned that it would terminate the designation of any regional center not paying the full fee within 90 days but would provide a notice of intent to terminate and an opportunity to prove payment before issuing a termination notice.

The Agency’s guidance essentially leads to automatic termination if a regional center fails to pay the required fee by the deadline, despite assurances that a regional center could prove it had paid on time.

Northern Rockies Regional Center, LLC:

• Established in Montana in May 2010 and designated as a regional center on April 11, 2011.
• Over 13 years, it raised over $488 million from foreign investors, creating more than 7,500 jobs in Montana.
• Completed two major projects and is currently seeking investments in three more focused on luxury housing, retail, and amenities in Big Sky, Montana.
• Timely paid its 2023 Integrity Fund fee of $20,000 on March 27, 2023.
• Negotiated a sale to Matthew Kidd, with ownership officially changing on October 16, 2023, after filing the necessary Form I-956 on June 16, 2023.
• The Agency approved the change of ownership on May 3, 2024, without mentioning any outstanding obligations.
• Northern Rockies missed the 2024 Integrity Fund fee payment due by October 1, 2023.
• The Agency issued a “Notice of Intent to Terminate” on June 27, 2024, requiring proof of payment, with a response deadline of July 30, 2024.

The Present Case:

• Northern Rockies filed a lawsuit on July 15, 2024, claiming the Notice violated the 2022 Reform and Integrity Act, the APA, and the Due Process Clause.
• A motion for a temporary restraining order was denied for procedural reasons.
• A preliminary injunction hearing on July 29, 2024, resulted in the court granting Northern Rockies’ request for preliminary injunctive relief.

A preliminary injunction is an exceptional remedy that isn’t automatically granted. To obtain one, Northern Rockies was required to demonstrate:

1. Likelihood of success on the merits.
2. Likelihood of suffering irreparable harm without the injunction.
3. Balance of equities tips in their favor.
4. An injunction is in the public interest.

Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008).

The court’s opinion discussed the Ninth Circuit’s use of a sliding scale: if Northern Rockies was able to show serious questions on the merits and a significant balance of hardships in their favor, they could obtain relief if there were also a likelihood of irreparable harm and the injunction would serve the public interest. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). 

The court held that Northern Rockies demonstrated serious questions on the merits of its APA claim, potential irreparable harm, and a balance of equities in its favor, justifying preliminary injunctive relief.

Likelihood of Success on the Merits: The court considered this to be the most crucial factor. Northern Rockies contended that the Notice violated procedural rights under the 2022 Reform and Integrity Act, the APA, and the Constitution. The Agency argued Northern Rockies didn’t exhaust administrative remedies and the statutes don’t require the notice that Northern Rockies alleged to be required. However, the court determined that Northern Rockies raised significant questions about pre-termination notice under the APA, meeting their burden for this factor.

A. Exhaustion of Administrative Remedies

The Agency argued that Northern Rockies could not seek judicial review until all administrative remedies were exhausted. Northern Rockies countered that exhaustion would be futile since the fee was undisputedly not paid by the deadline and the Agency asserted it lacks discretion to accept late payments. See Carr v. Saul 593 U.S. 83, 93 (2021) (recognizing futility exception to exhaustion requirements). The court held that this argument was convincing as an administrative appeal could not provide the requested relief, so failure to exhaust did not bar Northern Rockies’ claims.

B. 2022 Reform and Integrity Act

Northern Rockies claimed the Agency violated the 2022 Reform and Integrity Act by not following the mandated two-step process when a regional center fails to pay its fee. The Act requires the Agency to impose a reasonable penalty for late payments within 30 days and terminate the designation if the payment is still unpaid after 90 days. Northern Rockies argued they should have received notice of the penalty, which would have alerted them to the missed payment and prompted payment within the 90-day period.

However, the Agency argued that the Act does not specify the timing for assessing the penalty and that it can be imposed after the fact. The statute mandates a penalty for late payment, not necessarily a notice. The court determined that the Agency’s position on its discretion is inconsistent, having changed the deadline and waived late fees for 2023 but claiming it must terminate a regional center for missing the 90-day deadline now. This inconsistency supports the conclusion that the equities favor Northern Rockies. See Dep’t of Homeland Sec. v. Regents of U. of Cal., 591 U.S. 1, 24 (2020) (“[While m]en must turn square corners when they deal with the Government[,] … the Government should turn square corners in dealing with the people.” (internal quotation marks and citation omitted)).

C. Administrative Procedure Act (APA)

The APA provides procedural safeguards for entities with federal agency licenses, including notice of actions that may warrant revocation and an opportunity to comply with requirements. According to 5 U.S.C. § 558(c), except in cases of willfulness or public health and safety concerns, a license can only be revoked if the licensee is given:

1. Written notice of the facts or conduct that may warrant the action.
2. An opportunity to demonstrate or achieve compliance.

A “license” under the APA includes various forms of agency permits or approvals. A subsequent statute cannot override this without express language.

Northern Rockies argued that their regional center designation qualifies as a “license” under the APA, which the Agency disputed, claiming the APA does not apply to statutory and regulatory law governing immigration programs. The court considered Northern Rockies’ argument to be more persuasive, as courts have broadly interpreted the APA’s definition of a license. The Second Circuit considered a medical facility’s designation as a “civil surgeon” a license within the meaning of § 558. See N.Y. Pathological & X-Ray Labs., Inc. v. INS, 523 F.2d 79, 82 (2d Cir. 1975). After examining precedent, the court opined that Northern Rockies’ designation as a regional center is likely a “license” under the APA. 

The next issue that the court considered was whether the Agency complied with § 558(c). The Agency should have provided adequate notice and an opportunity for Northern Rockies to correct their shortcomings, as the APA aims to give individuals a “second chance” before license termination. Air N. Am., 937 F.2d at 1437. The court concluded that Northern Rockies raised a serious question about whether the notice provided by the Agency met the APA’s requirements.

The court found that the limited record showed that Northern Rockies received two “notices” regarding the Integrity Fund fee deadline. The first notice was in March 2023 when the Agency issued interpretive guidance to all regional centers. The Ninth Circuit has acknowledged that notice given when a rule becomes effective may suffice under the APA, but this depends on the context. In this case, the rule and guidance were new and unfamiliar, and the Agency had not strictly enforced the fee deadlines previously. The guidance was nonbinding as it was provided without the usual notice and comment period.

More importantly, Northern Rockies was not given an opportunity to pay the fee before being notified of its termination. The second notice, a Notice of Intent to Terminate, informed Northern Rockies of its noncompliance but did not provide a chance to comply. The APA requires an opportunity to comply or demonstrate compliance before license termination. The Ninth Circuit has emphasized that the purpose of the APA’s “second chance” doctrine is to allow entities to correct their transgressions before termination. Lawrence v. Commodity Futures Trading Comm’n, 759 F.2d 767, 773 (9th Cir. 1985). 

The court asserted that this does not necessarily mean that the Agency must give such notice prior to the 90-day timeframe for termination; rather that the opportunity to comply must be given before the actual suspension or cancellation of the license. The court found that Northern Rockies was not given any opportunity for compliance in this case. The court concluded that Northern Rockies raised serious questions about whether the notice provided by the Agency complied with § 558(c) of the APA.

D. Due Process

Northern Rockies argued that the Notice violated its Fifth Amendment Due Process rights because it deprived the company of a meaningful opportunity to respond. The court applied the three-part inquiry from Matthews v. Eldridge to assess the constitutional sufficiency of the governmental procedures at issue:

1. Nature of the Interest: The degree of potential deprivation caused by the official action.
2. Fairness and Reliability: The adequacy of existing procedures and the probable value of additional safeguards.
3. Public Interest: The administrative burden and societal costs associated with additional procedures.

The court found that the notice provided was adequate under the Constitution. 

Court’s Analysis:

1. Private Interests at Stake:
   • The ability to operate under the EB-5 program is critical for Northern Rockies.
   • Termination of the EB-5 designation would disrupt current projects, jeopardize 20,000 jobs, and result in significant financial costs (~$6.5 million in fees) and delays for re-designation.
   • The court found the private interest substantial due to the severe and immediate impact of termination.
2. Risk of Erroneous Deprivation:
   • Notice must be “reasonably calculated” to inform affected parties.
   • The Agency provided notice of fee deadlines through the Federal Register in March 2023.
   • While not individually notified, publication in the Federal Register is generally deemed sufficient under Supreme Court precedent.
   • The court concludes that the notice provided was sufficient under the circumstances, although it recognizes that Northern Rockies was not given an opportunity to rectify the noncompliance before termination.

The court held that Northern Rockies raised serious questions about whether the notice provided by the Agency met the requirements of § 558(c) of the APA and whether the procedures followed violated its due process rights. However, the Constitution does not require individualized notice or the same opportunity to cure. As such, the court held that Northern Rockies’ claim under the 2022 Reform and Integrity Act failed as a matter of law. 

Irreparable Harm:

Northern Rockies demonstrated that without its regional center designation, it would face irreparable harm beyond mere monetary loss. The loss would include the inability to participate in the EB-5 program, jeopardize approximately 515 pending immigrant visa petitions, risk existing projects, and impact jobs in Montana.

The Agency’s arguments that investors could reinvest elsewhere or that re-designation would be expedited were speculative and unsupported by evidence.

Balance of Equities and Public Interest:

The court found the harm to Northern Rockies serious and likely irreparable. It also opined that the Agency’s enforcement of the fee appeared arbitrary and capricious, stating that delaying termination for judicial review aligns with public interest, as it ensures proper administration of the new Integrity Act.

There was no statutory deadline for termination once the Agency decided to act, and allowing Northern Rockies to pay the fee would support the Act’s purpose of overseeing the EB-5 program.

“Ultimately, as stated by Northern Rockies at the preliminary injunction hearing, if the assessment is one of equity, there is no question that functionally terminating a million-dollar business that employs thousands of Montanans for the one time-failure to pay a $20,000 fee is not equitable.” Northern Rockies, at 10.

A $20,000 bond was deemed appropriate to cover potential costs and damages resulting from the preliminary injunction. The court granted Northern Rockies’ request for a preliminary injunction and required the company to pay a $20,000 bond by August 8, 2024.